Italian energy company Eni announced today the completion of a €2 billion sustainability-linked bond (SLB) issuance, its first SLB offering dedicated to retail investors in Italy, with cost of debt tied to the company’s renewable energy and decarbonization goals.

The company reported that the issuance size was doubled from its initial €1 billion offering, driven by very strong demand, with the bond more than 10x oversubscribed relative to the initial allocation. Drawing more than €10 billion of orders from over 300,000 investors, the issuance was closed on January 20th, well ahead of the expected date of February 3rd.

The successful issuance is the latest in a series of strong SLB offerings, following a slowdown in the market over the past few months.

Sustainability-linked debt has been one of the fastest growing areas of sustainable finance, with attributes including interest payments tied to an issuer’s achievement of specific sustainability targets. Corporate interest in sustainability-linked loans has grown rapidly, as the financing provides flexibility to use proceeds for general corporate purposes, while with instruments such as green bonds, raised funds can only be allocated to specific categories of green projects.

Following an extended period of rapid growth, however, SLB issuance slowed sharply in late 2022, with Moody’s Investors Service citing factors such as growing market scrutiny on the credibility and robustness of issuers’ SLB targets, and the sector’s exposure to high-yield issuance.

Recent strong issuances include SLBs from Air-France KLM and SK Hynix.

The terms of Eni’s SLB ties the cost of debt on the bonds to the company’s performance towards its decarbonization goals, including targets relating to installed renewable energy capacity, and the company’s upstream Scope 1 and 2 carbon footprint. The 5-year bond will initially pay a gross annual coupon of 4.3%, and will increase by 0.5% for the final payment at maturity if the company’s goals are not met.

Calling the success of the offering “extraordinary and surprising,” Eni CEO Claudio Descalzi said:

“It has been for us above all a very strong response in terms of trust from the Italian public, and this is the aspect that gives us the greatest satisfaction and strengthens us. So many Italians have believed in what we are doing, both in terms of progressively moving toward decarbonized industrial processes and products, and in terms of ensuring energy security.”

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